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State Name: New Jersey
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State Abbreviation: NJ
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If you've been following the MBS Commentary, you know what a big deal this afternoon could be. Markets have been preparing for it for weeks and MBS Live members have been on top of those movements every step of the way.

This afternoon, when markets are convulsing mere milliseconds after the Fed Announcement, MBS Live members will know what's going on before anyone else. The accuracy and speed of our real-time price stream and alerts is unmatched.

There was little reaction to this morning's economic data at 8:30am despite the fact that both reports were stronger-than expected. Consumer Sentiment at 9:55am didn't move the needle either as markets were already geared up for a Boehner/Cantor press conference following last night's failure on the part of the House to bring "Plan B" (Fiscal Cliff Tax/Spending bill) to a vote. Markets punished risk assets overnight and again this morning as Treasury yields dropped sharply from 8am to 9am. Similarly, MBS rallied a quarter of a point from opening levels, themselves already an eighth of a point improved from the previous session. The rest of the day was spent in a mostly slow-motion grind back toward those opening levels with brief periods of volatility surrounding the press-conference and to a much smaller extent, near the end of the session as volume began drying up ahead of the unofficial 4-day weekend (Monday is technically a half-day, but should be quite slow).

MBS Pricing Snapshot

Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.

Heads up for those on the fence with respect to locking or floating (with a 'quicker-to-reprice' lender) over the weekend: MBS just hit their lowest levels since bouncing at 104-19 during the Boehner/Cantor press conference just after 10am. We're not talking about big swings here as Fannie 3.0s are only down to 104-20, but for a small group of lenders, this adds marginally to reprice risk heading into the long weekend.

While Monday is technically a half-day for bond markets, it's more appropriately viewed as part of an unofficial 4-day weekend. In fact, if today's trading activity and directionality is any clue, make that 4.5 day weekend!

Things were a at least active enough in first few hours to matter, but markets quickly set about the task of finding their range following the "risk-off" move inspired by last night's political drama (House not passing or even voting on Plan B tax/spending bill).

There was a brief bounce back toward higher prices and yields as Boehner and Cantor took the podium around 10am, but no follow-through. Stocks fell back to previous AM lows and ever-cautious bond markets decided to simply "go no higher in yield" rather than swing back down to morning lows.

In terms of 10yr yields, that implied ceiling is 1.76 while MBS have been holding 104-21 as their post-press-conference floor. That's an eye-wateringly narrow 2 ticks from the morning highs that prevailed during rate sheet time. So if we happen to leak into weaker territory in these last two hours, it probably only makes sense to care about a break below the 104-19 level, which also came into play as support after the press conference. That said, please note that there's no way to know whether or not a lender or two will reprice for reasons other than MBS price movements. In that regard, past precedent is the best indication.

Justin Bayle : "anyone have Flagstar as an investor? Do they require live signatures (no Docusign) on the purchase contract?"

Ted Rood : "Love it when borrowers bring up reduced interest tax deductions during a refi. I offer to raise their rate if they'd like higher deductions, haven't had anyone take me up on it yet though."

MMNJ : "save more $$$ or, if reducing term, payoff house sooner. As my CPA says, there is no better write-off than oweing $0"

akaagassi : "Nice, JH ;) i've come across two people recently...my response has been at some point, you'll pay down your balance far enough where you won't be able to deduct it anymore and then you're stuck paying the higher interest rate...long-term, it's going to cost you more..."

Matthew Graham : "a) side by side analysis, b) MID may be on chopping block"

Jason Harris : "Easy....for every 30 cents they save in federal income tax....they give the bank an extra 70 cents in interest."

akaagassi : "Curious to see how you guys respond to people who say that they don't want to refinance because they will increase the income taxes they have to pay."

Ted Rood : "Think Boehner is on Plan F'ed."

Matthew Graham : "but i don't know if that assumed a passage of plan B or not. "

John Paunan : "No, it looks like Boehner indicated he would call back the house "as needed", so I guess it remains a remote possibility. Perhaps he'll do it to form the slightest of quorums and ram through a compromise. He wouldn't be speaker for very long if he did that though..."

John Paunan : "Adam, you're right. I thought maybe the speaker reserved the right to extend session, but doesn't look like he will. "

Adam Dahill : "But the house is excused until after Christmas no? "

Chris Kopec : "John.....that's a good, defensive posture. "

Matthew Graham : "maybe 20bps would be more fair. 1.95 being the first inflection point on the weak side if we get "a deal," and 1.55 on the strong side if we don't. Homing in on smack dab dead center in the meantime, after leaning slightly toward "deal" earlier this week."

John Paunan : "A lot can happen over the extended weekend in terms of fiscal cliff stuff...don't want to be stuck in a position where you can do anything...I'm taking the lock approach."

Chris Kopec : "MG....I agree.....it's all about safe harbor. Following the financial collapse, nobody is going to sail in an unknown sea, regardless of how calm the waters might appear."

Matthew Graham : "it's not the low rates that have helped keep the business intact, it's the confidence in the secondary market due to fed's involvement and explicit gov guarantee on GSE paper now"

Matthew Graham : "no one really knows if there would be a mortgage market of any kind without the Fed stepping in, or rather, no one really knows how long it would have been off-line. It was headed toward the sun for a while in mid to late 08."

Nick Solis : "in the short term we have because of rates, but I don't know about you I did the same volume in 08 when 30 yrs were 5.5 -6%.... and was a lot better without LO reform rules and dodd frank etc. fact is some of us may have more money today but shorter carears and abilty to earn in the mortgage business."

John Paunan : "Let's be clear, the reason why there is still a functioning mortgage industry is because of government largesse..."

Jason Harris : "Some people might argue that we (mortgage originators) have benefited from some government largesse of late...."

About the Author

A former originator, Matthew began writing for Mortgage News Daily in 2007, covering a wide range of topics. Seeing a need in the marketplace, his focus increasingly shifted toward relating MBS and broader financial markets for loan originators.
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